We are not aware of any laws or regulations that prohibit you from capitalizing interest (also known as “re-aging”) an open-end loan. The FFIEC imposes some limits on re-aging past due accounts, without prohibiting the practice, in its Uniform Retail Credit Classification and Account Management Policy (65 Fed. Reg. 36903, 36904 (June 12, 2000)):

Open-End Accounts

Institutions that re-age open-end accounts should establish a reasonable written policy and adhere to it.

To be considered for re-aging, an account should exhibit the following:

• The borrower has demonstrated a renewed willingness and ability to repay the loan.
• The account has existed for at least nine months.
• The borrower has made at least three consecutive minimum monthly payments or the equivalent cumulative amount. Funds may not be advanced by the institution for this purpose.

Open-end accounts should not be re-aged more than once within any twelve-month period and no more than twice within any five-year period. Institutions may adopt a more conservative re-aging standard; for example, some institutions allow only one re-aging in the lifetime of an open-end account. Additionally, an over-limit account may be re-aged at its outstanding balance (including the over-limit balance, interest, and fees), provided that no new credit is extended to the borrower until the balance falls below the predelinquency credit limit.

Institutions may re-age an account after it enters a workout program, including internal and third-party debt counseling services, but only after receipt of at least three consecutive minimum monthly payments or the equivalent cumulative amount, as agreed upon under the workout or debt management program. Re-aging for workout purposes is limited to once in a five-year period and is in addition to the once in twelve-months/twice in five-year limitation described above. To be effective, management information systems should track the principal reductions and charge-off history of loans in workout programs by type of program.